How CoinMarketCap Contributed To Cryptocurrency Price Crash

Part of the reason for the recent crash in cryptocurrency markets was’s decision to exclude South Korean exchanges from its listings. The website, which is also among the most-visited sites in the world, is regularly consulted by investors for the latest prices. It has largely shunned the spotlight, preferring to let its data do the talking.

On the day that the crash occurred, however, the silence proved catastrophic for cryptocurrency investors. Even as hundreds of billions of dollars in value was wiped out from cryptocurrency markets, there was not much comment forthcoming from the site.  

A WSJ article published this week provides additional details regarding the founder’s thought processes during that period. is maintained and operated by 31-year-old programmer Brandon Chez from an office in the Long Island City neighborhood of Queens, New York.

According to the WSJ article, Chez began excluding South Korean exchanges from his site’s calculations sometime on the evening of January 7, 2018. The following morning, on January 8, the site posted an update on its Twitter account outlining the reason for the exclusion ("extreme divergence" in prices).

By then, “a lot of users were complaining about the inaccurate prices,” Chez told the Journal, adding that he hadn’t realized the impact of his decision earlier. “I think the market was already on a downturn at that point so the timing was quite unfortunate,” he stated in an email. (See also: Cryptocurrency Exchanges Inch Closer To NYSE Trading Volumes.)

To be sure, the incident hasn’t affected CoinMarketCap’s popularity. It still remains the most popular and comprehensive site for checking on cryptocurrency prices. Unlike individual exchanges, which often have large disparities in coin prices, calculates a volume-weighted average for cryptocurrency prices. It thus provides a snapshot of the currency’s valuation across multiple markets at the same time, making it easy for traders to evaluate their prospects.

While CoinDesk offers a similar service to traders, it does not have the breadth in cryptocurrencies and simplicity of interface that characterizes CoinMarketCap's presentation. 

That said, competition may be on the horizon. The price disparities between individual coins provide an arbitrage opportunity for savvy traders. It is this demographic that Intercontinental Exchange Inc. (ICE), which owns the New York Stock Exchange, is targeting with its feed product announced recently. (See also: Bitcoin Price Moves Sideways As Analyst Predicts $25,000 Price Target.) 

Investing in cryptocurrencies and other Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns small amounts of bitcoin.

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